Radhika Rao, India economist at Singapore-based DBS said, “While at normal times such a surge is seen as an indication of higher economic activity or event-driven phenomenon like elections, we suspect that the recent increase reflects higher cash withdrawals by depositors to meet needs during the lockdown period.”

Between April 1 and May 8, currency with the public amounted to Rs 1.24 lakh crore compared to Rs 65,551 crore in the same period a year ago. "A lot of cash is not coming back to the banking system during the current lock-down phase," said Anush Raghavan, senior vice president, CMS Infosystem, a company engaged in cash handling. He further added that regulators have been ensuring there is no shortage of cash in ATMs.

Beneficiaries of government cash deposit through Direct Bank Transfer (DBT) also withdrew cash from their accounts, the report stated. Nearly Rs 50,000- Rs 60,000 crore of the stimulus package announced by the finance minister in March is said to have been withdrawn from the DBT accounts of women and senior Jan Dhan account holders.

Economists caution about this trend which could reverse with a surge in that cash going back to banks when normalcy returns. " (It is) also pointing to underlying caution over when normalcy would return," said Rao from DBS.

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